Can The Dow Make It A Full Dozen?

Monday, February 27, 2017

Water-cooler talk at the office this morning is very unlikely to include pre-market movement today, despite the Dow’s chance to make it a full dozen straight up days in the market. Unseasonably warm temperatures, as well as the biggest screw-up in Academy Awards history, will likely dominate your co-workers’ talking points, especially now that Q4 earnings season is almost completely behind us.

One thing on our lips might be some choice quotes from Warren Buffett this morning, both in his annual letter to shareholders and an exclusive interview with Becky Quick on CNBC. Buffett, an old school Midwesterner with a penchant for laying plain his opinions, was particularly rough on hedge fund managers, including saying that profits for hedge fund managers “borders on the obscene.” Otherwise, he brings more homespun pro-equities growth rhetoric (versus bonds) to the table, and a willing admittance that neither he, nor anyone he knows, is able to time the market.

We did see new Durable Goods Orders before the bell to start the week, 20 basis points higher than analysts had expected, coming in at 1.8% for January. This follows a surprisingly negative number of -0.8% in December. However, stripping out volatile segments like non-military, ex-aircraft shows a different picture: -0.4% is the January figure here, yet December was +1.1% ex-aircraft and non-military. This goes a long way in demonstrating how a few more war planes here or there can really sway these numbers.

Home Sales statistics come out at 10am ET, following REIT housing reads late last week. These figures beat analysts’ expectations slightly on historically low levels overall. Housing is something watched very closely and is not as volatile as aircraft sales, thus there is less chance of a major surprise here. Which means it’s less likely to augment the fortunes of today’s market when the numbers hit the tape.

Twenty-five minutes ahead of the market open, the S&P 500 is -1, the Dow -13 and the Nasdaq -10. This is not to say there can’t be a turnaround at some point today — we’ve seen it recently, even among this impressive string of 11 straight up days for the Dow, where the pre-market starts out slightly in the red and recovers, giving more credence to the Trump Rally. We’ll see today if this continues.

Mark Vickery
Senior Editor

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